This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 VILNIUS 001277
SIPDIS
SENSITIVE
STATE FOR EUR/NB
E.O. 12958: N/A
TAGS: PGOVPINSLH
SUBJECT: GOL DEFENSE SPENDING ON THE RISE
Â¶1. (SBU) Summary: Lithuania is set to achieve a 15 percent
increase in its defense budget in 2006 in absolute terms.
The key benchmark of military spending as a percentage of GDP
will rise from 1.27 in 2005 to 1.32. Defense officials and
key members of parliament are aware that sustained increases
in spending and more flexible funding procedures are
necessary to meet Lithuania's transformation goals and
heightened NATO obligations. The lack of a mechanism to fund
major capital acquisitions, however, will continue to hamper
long-term military planning, as evinced this budget cycle by
disagreements over the purchase of transport aircraft. We
will continue to focus on the issue of defense spending in
discussions with parliamentary leaders and in public
diplomacy outreach. End Summary.
Â¶2. (U) Parliament will vote December 8 on the 2006 budget.
Due to Lithuania's rapidly growing economy, a 15 percent
increase in defense spending translates into a 0.05 percent
increase in military expenditures as a percentage of GDP.
This 0.05 percent growth figure is the goal that proponents
in parliament of increased defense spending set as their goal
for the 2006 budget. MOD officials and parliamentarians told
us that securing such an increase will be a major
accomplishment considering the other pressing priorities in a
country whose GDP per capita is approximately USD 6500.
Â¶3. (SBU) Budget and Finance Committee Chair Jonas Lionginas
told us November 29 that he sees no obstacles to passage of
the defense budget in its current form. The MOD's request to
take out a loan of USD 36 million to fund the purchase of one
passenger plane for government officials and three tactical
transport planes, however, is up against significant
opposition. (Two U.S. companies, Lockheed Martin and Boeing,
would like to sell Lithuania the passenger plane.)
Lionginas's committee did not approve the loan. He explained
to us his view that the MOD should fund its purchases out of
its budget. Prime Minister Brazauskas, not normally
considered a defense hawk, surprisingly weighed in on this
issue on November 29 with a public statement of support for
the purchase of the planes. Brazauskas did not comment on
the question of whether a loan is the best way to fund this
acquisition.
Â¶4. (U) The issue of the loan for the transport planes, which
would help fulfill a NATO force goal, highlights the
difficulty the GOL faces in making major acquisitions and
engaging in long-term defense planning. The MOD is not able
to fund such large acquisitions out of its budget. A USD 36
million expenditure for aircraft, for example, would consume
approximately ten percent of the entire defense budget. MOD
officials told us they have briefed MPs on this problem. MP
Vaclov Stankevic, Chair of the NATO commission, told us that
he is keenly aware of the need for more flexible funding
procedures, but that many MPs are still not focused on this
issue.
Â¶5. (SBU) The MOD is also limited in its ability to project
its budget picture with the accuracy it needs. The Ministry
of Finance provides three-year budget projections, but
defense officials have to figure out how to meet NATO force
goals far beyond that. MOD officials also admit that they
still face a learning curve in NATO force goal development, a
process that they have now experienced twice. MOD officials
told us that locking in a 0.05 percent yearly increase in
defense spending as a percentage of GDP would be an important
step in bringing some clarity to their long-term budget
picture.
Â¶6. (SBU) Defense officials predicted to us that, due to
these constraints, they will face significant challenges in
meeting certain NATO force goals and deadlines in the
2006-2008 cycle. They specifically cited communications
capabilities, an explosive ordnance disposal platoon, a role
2 medical facility, and the transport aircraft as areas where
they will miss deadlines or only partially fulfill
requirements. They assured us that they are in close contact
with NATO to refine deadlines and keep the Alliance informed
of potential shortfalls.
Â¶7. (SBU) Comment: The 15 percent increase in defense
spending that the GOL will likely achieve this year
represents a step forward in building the military we want
Lithuania to have. Support in parliament for increasing
spending to meet the two percent goal appears solid, though
there are no illusions that at the current rate the GOL will
reach its goal anytime soon. We will work to support the MOD
in institutionalizing 0.05 percent as a percentage of GDP as
a minimum yearly increase in defense spending. We will also
engage MPs on the necessity of having more flexible funding
mechanisms for big-ticket items that are difficult to include
as line items in yearly budgets.
MULL